Unemployment

Frederick Fourie, REDI3x3, based at SALDRU, University of Cape Town on 31 July 2018

Reads 1,655

In this extract from a new REDI3x3 book, the employment-creating behaviour of informal enterprises is analysed – in particular, enterprises with employees. Almost half of those working in the informal sector work in such multi-person firms – which provide paid work to about 850 000 people (owner-operators plus paid employees). There is a growing employment orientation and employment intensity. Jobs are created via new-firm entry as well as employment expansion – also by one-person enterprises. Entrant firms are vulnerable, though.

Frederick Fourie, REDI3x3, based at SALDRU, University of Cape Town on 23 July 2018

Reads 7,116

In the first extract from a new REDI3x3 book on the role of the informal sector in job creation and poverty reduction, a compact picture of the size, texture and impact of the sector is provided. One in every six South Africans who work, work in the informal sector. Several policy-relevant features are highlighted, such as industry, spatial and gender dimensions. This provides the backdrop for the second extract on the employment-creating performance of the informal sector.

The responses of unemployed workers to the typical survey question about their ‘lowest acceptable wages’ are susceptible to error and overestimation – particularly for people in persistent joblessness. Studies using only the responses to the standard question may incorrectly conclude that vulnerable workers are unemployed because they tend to price themselves out of employment – while in fact their responses are just unreliable and distorted indications of their true reservation wages. Alternative questions would give more reliable results.

Michael Aliber, Department of Agricultural Economics and Extension, University of Fort Hare on 2 August 2017

Reads 3,193

The dominant perspective on the economic situation of the former homelands is that long-term, deliberate neglect has left a durable legacy of poverty and stagnation. While this may be largely correct, there is also evidence to suggest that the former homelands are dynamic. This article presents some evidence on population, employment and unemployment, in particular through a focus on the evolving nature of the linkages between former homeland towns and their rural environs.

The REDI3x3 research project has completed most of its research at a time when unemployment, poverty and inequality is intense. With growth at just 0.5%, government needs to become more innovative in fixing the social policies that hamper progress. It should draw on all the research evidence to find ways to transform the structure of the economy without inhibiting growth. Addressing education, low labour intensity, the informal sector and the spatial legacies of apartheid can make a real difference.

This article compares the labour-market status of migrants and locally born residents. The focus is on migration into Cape Town and the Western Cape from elsewhere in South Africa. Survey and census data show that migrants were more likely to be unemployed than residents in 2001 and 2011. However, in 2011 migrants were also more likely to be employed and to be economically active (working or wishing to work) than locally born residents. They are also more likely to be self-employed than non-migrants.

Increasing the wages of workers in the bottom half of the wage distribution contributes less to regional unemployment than increasing the wages of better-paid workers. The wages of the worst-paid – who live in regions of low union and large-firm concentration – play almost no role in unemployment. Collective bargaining arrangements appear to explain these differences. This phenomenon may soften the negative impact of a national minimum wage on employment in the short run, but might make matters worse in the longer run.

The problematics of the situation in South Africa are clear: high unemployment, high inequality and low growth, combined with a lack of consensus on what to do. It might be more fruitful to think in ‘grand bargain’ terms: a package of policies that are intended to balance opposing perspectives whose differences cannot be resolved through technical debate – and to set short-term political-economic imperatives against the longer time horizon needed for policy interventions to address deep structural legacies

It has been argued that properly focused workplace intermediaries can reshape the labour market to become more youth friendly. Case studies of NGO intermediaries in South Africa offer some optimism but also caution in this regard. Although the intermediaries were able to match unemployed youth to jobs, smooth the transition to work and even positively influence employers’ reticence, they are small in scale and costs are high – and they have yet to broker larger pacts to add more jobs.

Labour-market intermediaries can make a significant contribution to the reduction of youth unemployment.They recognise that the demand for labour is not fixed. By reshaping the attributes and broader workplace skills of the young jobseeker, labour market intermediaries can help overcome employers’ reticence to employing first-time workers. Such interventions, although small in scale, may be more successful than larger public works schemes of government. The potential positive impact of such intermediaries is demonstrated with international examples.

A forum for critical debate...

. . . on unemployment and employment, income distribution and inclusive growth in South Africa. It publishes accessible research- and expertise-based contributions. The forum encourages debate on an integrated and consistent policy response to unemployment, inequality and poverty and a strong engagement between research and policy making. We invite contributions from economists and other social science researchers, policymakers and relevant experts.

Download from HSRC Open Access:

‘A prerequisite for good policy-making for this part of the economy is good analysis. … This volume embodies analytical excellence. I look forward to its impact on policy-making in South Africa and the world.’

Econ3x3 readership statistics:1100 reads per day on average; more than 600 000 reads in previous 12 months; more than 1.25 million reads up to August 2018 since launch in Dec. 2012; average 12 000 reads per article. About 25% of site visits are from outside South Africa; significant numbers from the USA, UK, India and Nigeria.

INTERESTING STUFF from elsewhere...

The stable middle class in South Africa may be smaller than thoughtMurray Leibbrandt & Rocco ZizzamiaSA’s emerging black middle class has been hailed as the sign of a new, deracialised postapartheid economy. But the stable middle class may be much smaller than previously thought. The ‘vulnerable middle class’ are those who have been poor and who are likely to become poor in future. This vulnerability can be attributed to precarious forms of employment. [From Business Day]The fourth industrial revolution in Africa: potential for inclusive growth?Wim NaudeAround 170 million Africans will enter the continent’s labour market between 2010 and 2020. African policymakers consider industrialization as the way to create employment opportunities for these new labour market entrants. With new technological changes and the rise of robotization, how can industrialization ensure inclusive growth? [From The Broker.] Why new entrants struggle to break into SA's retail spaceReena nas NairA handful large supermarket chains hold over 70% of the national market share. This suggests barriers to entry and expansion faced by new entrants, which make it difficult for entrepreneurs, particularly historically disadvantaged ones, to meaningfully participate in this space. It is crucial to open up the market to allow a diversity of retail formats to flourish. [From The Conversation.]

Making the jump from academic research to the policy jungleNeva MakgetlaIt is crucial that academics help policy makers. They have greater objectivity, expertise and in-depth understanding than most analysts. But translating their research to the jungle of government policy making takes effort. They must be willing to take the time and grief to generate useful, even second-best, policy options that meet the hard imperatives of a complex and divided society. [From The Conversation.]

Free tertiariy education will escalate inequalitySteven FriedmanMoney is available for free post-school education, but only if there is less for other public services. Free university is affordable only if programmes that serve the poor — social grants, primary health and, for that matter, basic education — are reduced. That will increase, not reduce, inequality. Public services can reach all the people who need them only if the more wealthy, who can pay their share, do. [From Business Day.]

Class and race shape how young people access the job marketGlenda KrussSocial networks remain the main method of job search for many. But the ability to access social networks is shaped unequally by the education, class and race background. This is particularly the case for jobs that require a university qualification: which university you come from, matters a great deal. For job seekers from poor rural areas, social networks are less helpful. This is why formal public mechanisms are important, particularly for those looking for low-level skilled jobs. [From The Conversation.]

Why it doesn't make sense that all informal mining is deemed illegalKgothatso NhlengetwaA distinction must be made between illegal mining and informal mining, such as women mining semiprecious tiger’s eye quartz in the Northern Cape. Informal mining often is community based and follows customary law; no trespassing of land takes place – it is very different from zama-zamas. It is time for these practices to be formally recognised in law, thereby enabling small-scale informal mining to be developed whilst dealing with invasive mining as illegal. [From The Conversation.]

Economic growth isn't over, but it doesn't create jobs like it used toMartin FordUnlike innovations in 1870-1970, which were powerful job creators, information technology and artificial intelligence is going to make innovations in the future less labour-intensive. Unless we change our economic rules — perhaps with something like a guaranteed income — the resultant growth will not translate into broad-based prosperity. The innovations may come, but the people at the top of the income distribution will continue to capture nearly all of the gains. {From the Harvard Business Review.]

Can agriculture sustain a nourishing rural non-farm economy?Andries du Toit, Univ. of the Western CapeAgricultural development can only serve inclusive growth if it also contributes to the rural non-farm economy, becoming a hub for forward and backward linkages into the local economy. Apart from pro-smallfarmer land reform, this requires support for local retail and informal markets often disregarded by urban planners. Policies should protect informal growers and retailers from being swamped by large-scale agriculture and corporate retailers in rural markets. [From The Conversation.]

Why the voice of Africa's informal economy should be heardTerence Jackson, Middlesex UniversityThe informal economy in Africa is big business. But governments and organisations like the World Bank and ILO do not like the informal economy. Policy has veered from supportive to antagonistic. Many governments are unaware of the contribution of the informal economy, which has a weak voice. Policymakers must start listening - to formulate inclusive policies more relevant to Africa’s development. [From The Conversation.]

The informal sector in Africa is here to stay. Are city governments ready for this challenge?Louise Fox,University of California, BerkeleyProductively employing Africa’s ‘youth bulge’ is an urgent urban development problem. Sub-Saharan Africa has the youngest population in the world. High fertility (even in urban areas) and rural-urban migration means that new workforce entrants – mostly youth – are looking to urban and peri-urban areas for employment. Are urban leaders ready for this? [From The Broker.]

Education is not the cure-all for economic problems it is made out to beSteven Friedman, University of JohannesburgJust about everyone agrees that more and better education is a solution to most of our economic problems, including inequality. However, education often produces inequality. Education is not a miracle cure and the fixation with its supposed healing powers may divert us from tackling our deeper problems. [From Business Day.]

How high unemployment has eclipsed the plight of South Africa's working poorMike Rogan & John Reynolds, Rhodes UniversitySince 2006, more than one-fifth of South Africa’s total workforce has been living in households which are not able to meet their basic minimum food and non-food requirements. Unemployment is the main concern for about half of the poor population while low earnings or the poor quality of work is the concern for the other half.[From The Conversation.]

How current measures underestimate the level of poverty in South AfricaJosh Budlender, Ingrid Woolard & Murray LeibbrandtA review of South Africa's measures of poverty shows that close to 63% of people in the country are poor. This is significantly higher than the usually-quoted StatsSA figure of 53%s, which is based on their (adjusted) upper-bound poverty line.[From The Conversation.]

Articles from Project Syndicate

Where will all the workers go?Daniel Roubini, New York UniversityRecent technological advances have three biases: They tend to be capital-intensive; skill-intensive; and labor-saving (thus reducing the total number of unskilled and semi-skilled jobs in the economy). Robotics and automation will continue to displace workers in blue-collar manufacturing jobs. Eventually, technology will replace manufacturing and service jobs in emerging markets as well. Training workers in the relevant skills may not be sufficient to absorb workers, in which case it will become necessary to provide permanent income support to those whose jobs are displaced by software and machines.

Articles from The Broker website - perspectives from Europe:

Embracing inclusive growthEvert-Jan Quak, The BrokerNow that economists more and more accept the idea that inequality is rising in most parts of the world and harms sustainable economic growth, the obvious next step is to change the policies that cause it. Is redistribution enough? Or do we have to go further to embrace inclusive growth?

Unleashing those constrained gazellesMichael Grimm, University of PassauSMEs can and need to play an important role in securing and creating new jobs, if development programmes revert their focus to job creation with the help of effective training and restructured access to finance.

Employment needs more than GDP growthFrans Bieckmann, The BrokerThe prevailing assumption that GDP growth alone will generate more decent work is not valid. And it obstructs the creation of a society in which labour serves and dignifies both the individuals and the collective. Labour is more than a mere input for economic growth.

*****************************The three Rs...

READ, WRITE & REASON

Econ3x3 provides a platform to promote robust economic policy discourse in South Africa. The complexity, but also sterility of public debate on many policy issues, demands that knowledgeable individuals engage in robust debate. This can inform other individuals and policymakers on issues that they deal with in day-to-day policy making or policy analysis.

Write an article; write a commentary

Subscribe to our email or Twitter notification services, so that you are aware of new postings.

Share articles with your colleagues and friends.

There is a comment box at the bottom of every article (you have to register).

PDFs of articles can be downloadedfor private use or students. There is a download icon at the bottom of each article.

To read more about REDI3x3 - The Reseach Project on Employment, Income Distribution and Inclusive Growth, click on the REDI3x3logo in the top banner.